Darden: Highest Quality Restaurant By Far, Says Analyst

By Avi Salzman

Restaurant companies have been in a prolonged period of stagflation, with same store sales trailing inflation since 2005, says Goldman Sachs analyst Michael Kelter. That’s not likely to change in 2012, Kelter writes, but there are still some restaurants that have discovered how to get consumers to part with their money.

“We view Darden as the highest quality casual dining stock by a relatively wide margin. (1) DRI owns three of the four highest scoring brands in our restaurant survey, (2) There is future growth potential from LongHorn and the concepts being incubated within its Specialty Restaurant Group, (3) Profitability is exceptionally strong, (4) FCF is staple-like in its consistency, and (5) DRI is shareholder friendly with respect to its cash deployment. We expect double-digit EPS growth for each of the next several years.”

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